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US Supreme Court upholds Visa and MasterCard ruling

04 October 2004  |  6682 views  |  0 Visa

The US Supreme Court has upheld a ruling that Visa and MasterCard violated federal antitrust laws by banning their member banks from issuing cards from rival firms such as American Express and Morgan Stanley Discover.

The court rejected two separate appeals from MasterCard and Visa.

The appeals stemmed from a US government antitrust lawsuit brought by the US Justice Department against Visa and MasterCard in 1998, which claimed exclusionary rules preventing banks from issuing rival cards were anti-competitive.

A federal judge in New York ruled in 2001 that the rules were unlawful. A US appeals court upheld that decision last year. Visa and MasterCard, which have argued that the rules do not hurt competition, appealed to the Supreme Court.

In a statement issued immediately after today's ruling, David Nelms, chairman and CEO, Discover Financial Services, says: "This is a victory for consumers, merchants and financial institutions. Today's decision frees financial institutions to partner with Discover Financial Services, which will provide more choice and value to consumers and merchants."

In a separate statement, Kenneth Chenault, chairman and CEO, American Express, says: "The Supreme Court's decision means the end, once and for all, of Visa and MasterCard rules that have prevented banks from issuing cards on rival networks.

"In effect, the Court has decided that these rules are illegal and must be abolished."

Hitting back at American Express, Daniel Tarman, SVP, Visa USA, says: "American Express competes against Visa's members to market their own brand to the banks' payment card and financial services customers."

According to a report by the Financial Times, American Express and Morgan Stanley's Discover credit card business will file a lawsuit against Visa and MasterCard claiming up to a billion dollars in damages, following the Supreme Court's decision.

The two firms claim that Visa and MasterCard's actions in barring member banks from issuing rival credit cards in the US over the past decade was anticompetitive and deprived them of hundreds of millions of dollars in business.

Discover confirmed it was filing a lawsuit against Visa and MasterCard directly after the US Supreme Court rejected the appeals. Nelms says: "Now that Visa and MasterCard's anticompetitive bylaws have finally been struck down as unlawful, we are moving forward with our business plans and are seeking triple damages for the harm that those violations have caused us."
KeywordsLEGAL

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